The ratio of leading-to-coincident economic indicators is at historic lows seen only in deep recessions (1982, 2009). However, this may be skewed by the leading indicators' reliance on extremely negative consumer sentiment surveys. This divergence suggests we might be at the bottom of a cycle, not the beginning of a downturn.

Aggregate economic data looks positive because the top 10% of households drive consumption. However, the bottom 90% are experiencing financial distress, which is reflected in negative consumer sentiment. The 'average' consumer experience doesn't exist, leading to a disconnect between official statistics and public perception.

A historically reliable recession predictor, the Conference Board's Composite Leading Indicator, has been declining for years and experienced a peak-to-trough drop that has always preceded a recession. Its failure to correctly signal one in the 2022-2023 period shows how even trusted indicators can be fallible in the current economy.

The standard Sahm Rule recession indicator previously failed. A new version, adjusted for volatile labor force participation, has a perfect track record and has been triggered for three consecutive months, suggesting the U.S. is currently in a recession despite positive GDP.

Public pessimism about the economy persists despite strong data because of a self-perpetuating cycle of negativity. Coined "negative emotional contagion," this phenomenon is fueled by a general lack of institutional trust and is difficult to reverse even with positive news.

Economic analysts are increasingly discounting consumer and business sentiment surveys like the ISM print. A growing disconnect between what these surveys report (e.g., consumer misery) and actual economic behavior (e.g., stable spending) forces a greater reliance on hard data.

Economic activity like spending, borrowing, and investing is ultimately dictated by how people feel about their future. Positive economic data becomes irrelevant if the prevailing consumer sentiment is fear and uncertainty, a lesson powerfully demonstrated by Japan's multi-decade stagnation despite immense monetary stimulus.

The University of Michigan's "Current Conditions Index" has fallen to its lowest point since 1978, indicating extreme dissatisfaction with the present economy. This pessimism is deeper than during the Great Recession, even as consumers maintain some hope for improvement in the next six months.

Consumer sentiment is low not just because of inflation but due to the psychological weight of a constant barrage of overlapping crises (a "polycrisis"). The volume of uncertainties—geopolitical, technological, economic—creates an incessant feeling of instability that weighs on consumers, even when their personal finances are stable.